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Taaleem PJSC v (1) National Bonds Corporation PJSC and (2) Deyaar Development PJSC [2010] DIFC CFI 014

Taaleem PJSC v (1) National Bonds Corporation PJSC and (2) Deyaar Development PJSC [2010] DIFC CFI 014

October 21, 2010

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Claim No.: CFI 014/2010

THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai


IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR JOHN CHADWICK

Between

TAALEEM PJSC Claimant
-v-


(1) NATIONAL BONDS CORPORATION PJSC
(2) DEYAAR DEVELOPMENT PJSC

Defendants

Hearing Date: 11 October 2010
Counsel: Tom Montague-Smith (representing Hogan Lovells (Middle East LLP) for Claimant

Nicholas Tse (representing Hikmat Fayad & Associates) for First Defendant

Judgment: 21 October 2010

JUDGMENT

1. This application is made in proceedings brought by Taaleem PJSC against National Bonds Corporation PJSC and another. Those proceedings were commenced in the DIFC Courts in May of 2010. The relief claimed in the proceedings, so far as material, was a declaration against National Bonds Corporation, the First Defendant, that the Claimant, Taaleem, was not liable to pay certain sums of money alleged to be due to National Bonds Corporation under what was described in the Particulars of Claim as a Wakala agreement. The amount was some AED 236 million.

 

2. The liability for that sum is said to arise under an agreement dated July 2008 which is more appropriately described as a Muhabara agreement rather than a Wakala agreement. The form which the agreement takes is a sale by National Bonds Corporation of certain interests in land (or possibly certain interests in a company which owns land) within the Dubai International Financial Centre.

 

3. The basis of the Claimant’s claim to a declaration is that its liabilities under that agreement were assumed, with the consent of National Bonds Corporation, by the Second Defendant, Deyaar Development PJSC. That is denied by Deyaar Development. Deyaar have brought a counterclaim against Taaleem in the proceedings. Deyaar assert, first, that no novation was ever completed; and, secondly, that, even if it had been, it was entered into in breach of the fiduciary duties of common directors.

 

4. The proceedings were duly served on National Bonds Corporation. National Bonds Corporation made an application (Application 42/2010) challenging the jurisdiction of the DIFC Courts. That application came before me in June of 2010 for directions; and the substantive hearing was on 23 September 2010, also before me. I indicated on 23 September that I would dismiss the challenge to the jurisdiction of the Court for reasons that would be put in writing as soon as convenient. That decision is recorded in an Order dated 26 September 2010. National Bonds Corporation have indicated an intention to seek leave to appeal from my decision from the Court of Appeal of the DIFC Courts.

 

5. In the course of the hearing on 23 September 2010, the Court and the advocates for Taaleem were informed that National Bonds Corporation had commenced proceedings in the Dubai Civil Court seeking payment of the sums under the agreement which were in issue in the DIFC proceedings then before this Court. That is to say, National Bonds Corporation was seeking in the Dubai Civil Court repayment of monies said to be payable by Taaleem under the same Muhabara agreement.

 

6. This Court was told on 23 September that that was the first that Taaleem had ever heard of those proceedings in the Dubai Civil Court. That now appears to be incorrect. It is accepted, in a witness statement of Mr Ziad Azzam, the Chief Executive Officer of Taaleem, that the proceedings were served on an employee of Taaleem on or about 3 August 2010; and that there is reason to think that the documents served were brought to his attention, although he did not react to them. Be that as it may, the effect was that Taaleem took no part before the Dubai Court of First Instance when the Dubai Court proceedings came for hearing on 23 September (the same day as the substantive hearing of the jurisdiction challenge in this Court).

 

7. It appears that the Judge in the Dubai Civil Court took the view that it would not be necessary to re-notify Taaleem, as defendant to those proceedings. He must, I think, have been satisfied that the proceedings had been duly served. But he adjourned further consideration of the order which he would make until 14 October 2010. The position, therefore, is that on 14 October 2010 it is anticipated that the Dubai Civil Court will give judgment on the claim which National Bonds Corporation has brought against Taaieem PJSC in that Court.

 

8. Taleem’s response to that position has been two-fold. First, it has issued an application in this Court for an injunction requiring National Bonds Corporation to apply for a stay of the proceedings in the Dubai Civil Court. Secondly, it has made its own request in the Dubai Civil Court (under case number 1298/2010) for the pleadings in the Dubai Civil Court action to be re-opened on the grounds that:

“The Respondent [that is Taaleem] has not been legally notified as it had to be re-notified and it has not been able to attend the hearing being not surely aware of the Court notice and accordingly it has not been able to present its defence.”

 

9. There is no reason to think that the Dubai Civil Court Judge will not have had an opportunity to consider that request before he gives, or does not give, judgment on 14 October 2010.

 

10. It is in those circumstances that the application for what, is in effect, an anti-suit injunction is now made to this Court at short notice. The application has been attended by representatives of National Bonds Corporation and I have the benefit of a full skeleton argument on their behalf.

 

11. In my view, this is not an appropriate case for this Court to grant the anti-suit injunction sought.

 

12. It is important to have in mind that this Court and the Dubai Civil Courts have entered into a Protocol of Jurisdiction setting out how matters of dispute should be dealt with. The Protocol is dated 7 December 2009. Article 3 of the Protocol provides that the Dubai Courts and the DIFC Courts agree that the DIFC Courts shall have exclusive jurisdiction over five categories of case. For present purposes it is necessary, I think, only to refer to two of those categories. Article 3.2 is in these terms:

“Civil or commercial cases and disputes arising from, or related to a contract that is to be, or has been formed in whole or in part within the DIFC”

Article 3.3 refers:

“to civil or commercial cases and disputes arising from, or related to a transaction that has taken place in whole or in part in the Centre and which is related to financial banking activities, financial activities, ancillary activities, or any activities licensed to be performed within the DIFC”.

Article 5 of that Protocol provides for the position where either the DIFC Courts or the Dubai Civil Courts reach the conclusion that they have no jurisdiction to hear the case. In such a case the matter may be submitted by way, in effect, of transfer to the other Court.
Article 7 is in these terms:

“This Protocol will apply until a legislative amendment further defines the jurisdiction between the two Courts and to identify the relevant Court to resolve any conflict of jurisdiction between the two Courts whether the conflict is positive or negative.”

 

13. That article contemplates the possibility that each Court might reach a different decision as to whether a dispute fell within one or other of the five categories in Article 3; and recognises that under the present legislation there is no obvious solution to that problem. In particular, Article 7 is inconsistent with the submission made to me on behalf of Taaleem that the matter is already settled by Article 8 of the DIFC Law. Article 8 of the DIFC Law is in these terms:

“The Centre’s Courts shall have exclusive competence to interpret this law, the Centre’s laws, and the Centre’s regulations.”

 

14. It is said that the effect of that Article is that in the case of any difference of view the DIFC’s view must prevail. As it seems to me the Article does not have the effect of requiring the Dubai Civil Court to accept this Court’s decision on jurisdiction: what it plainly does provide is that, in this Court, this Court’s view prevails; and, as I have said, this Court already accepted jurisdiction.

 

15. I am asked, in effect, to make an order which is intended to have the result that the Dubai Civil Court will not have the opportunity, at least pending an appeal from my decision on 23 September, of considering the question whether or not it claims jurisdiction. I put it that way because, if the Dubai Civil Court were to accept that the dispute fell within one or other of the five heads in Article 3 of the Protocol, it could be expected to recognise, under the terms of the Protocol, that exclusive jurisdiction lay in this Court. Equally, if the Dubai Civil Court were to reach the conclusion that the matter did not fall within one or other of those five heads then Article 4 of the Protocol it would be led to the view that the matter was exclusively within its own jurisdiction.

 

16. In those circumstances, as it seems to me, the sensible course is to allow the Dubai Civil Court to consider the matter unimpeded by any order of this Court in the terms sought in the present application. The Dubai Civil Court will know that this Court has made the order of 26 September accepting jurisdiction. It will have the opportunity to consider, first, whether it accepts that view of jurisdiction; second whether, it prefers to await a reasoned judgment of this Court before coming to a conclusion on that point; and third, whether it would prefer to wait until there was an appeal judgment in this Court on the point.

 

17. It is far too early to accept that the Dubai Civil Court will arrive at a conclusion which differs from the conclusion of this Court. It is to be hoped that the two Courts will take the same view of matters of this kind – whether at First Instance or Appellate level – and it is to be expected, in the light of the common assurances of co-operation in the Protocol that some way will be found to resolve differences (if any) between them.

 

18. What, as it seems to me, is unlikely to be helpful is for this Court to seek to appropriate to itself the right to decide questions of jurisdiction to the exclusion of the Dubai Civil Court; without affording to the Dubai Civil Court the opportunity of considering the problem in the individual case. It may be expected – that as the jurisprudence develops and as more cases come before the two Courts – a pattern will emerge which enables the parties and their advisors to predict with reasonable certainty which Court will accept jurisdiction and which will not.

 

19. It is plainly not intended either that both Courts wili accept jurisdiction; or that both Courts will decline jurisdiction. The framework within the legislation in force in the Emirate contemplates that these matters will be heard in one Court rather than the other and sets out provisions which enables a decision to be made as to which Court that should be.

 

20. The problem arises because it is not impossible that, in some circumstances, the two Courts might take different views as to the effect of that legislation. If that proves to be a real problem in practice then some steps will need to be taken in order to solve it; but, as I have said, it seems to me essentially unhelpful to attempt to solve it by the grant of anti-suit injunctions at this stage. A fortiori in this case, where the problem may never in fact arise.

 

21. For those reasons I dismiss the application that was made by Taaleem for an anti-suit injunction.

 

Justice Sir John Chadwick
Dated: 21 October 2010
At: 4pm

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